The Airline Industry is about to see major changes. The purpose of this letter is to represent the airline industry’s response to the Department of Transportation’s (DOT) report titled: “Competitive Impact Assessment for Air Transportation Regulation.”

As we prepare for the upcoming Presidential election, the airline industry is often referred to as a major economic issue that will have a profound effect on the country and the future of travel. The Obama administration has indicated that they will support a number of steps regarding the industry, including new rules that would empower the government to maintain a domestic air fleet and to include more domestic routes in airline pricing. However, many of the same issues that have been plaguing the industry for decades continue to persist. Will the Obama administration be able to get the job done, and make the airline industry as competitive as it should be?

Is The Airline Industry Competitive? The Biden Administration Wants To Make 7 Changes

Is the airline industry competitive? Biden administration wants 7 changes

Gary Leff 10. July 2023

At a time when the Biden administration is seeking to tighten antitrust rules across the economy, the airline industry lobby group issued a statement saying the industry is already highly competitive. Some of their arguments are correct, others are misleading, and they overlook the role of government in protecting the major airlines from competition that might force them to improve their products.

Here’s what President Biden’s executive order says about the airlines,

  1. Re-establish and involve the Advisory Committee on Consumer Affairs in aviation and ensure that it is composed of representatives of airlines, airports, consumers and government.
  2. New rules on consumer access to airline flight information to make it easier for consumers to find a wider range of available flights, including from new and lesser-known airlines, which will likely mean that travel sites will be required to display Southwest’s flights even if Southwest doesn’t pay to be included in all global distribution systems (free advertising: we can’t sell you those flights and you can get a better deal on Southwest’s website).
  3. New rules on advertising, marketing, pricing and surcharges, for example. B. ask for refunds for baggage delays of 12 hours or more, and buy wifi when the internet on the plane doesn’t work.
  4. Report on airlines refusing to refund money during Covid-19 (hello United and JetBlue, as well as foreign carriers like Air Canada and TAP Air Portugal)
  5. Repeal of DOT’s unfair and deceptive practices scope limitation.
  6. New rules to ensure that consumers receive information about additional costs, such as baggage fees, deferral fees and cancellation fees, when they purchase a ticket, but the consumer already has this information. The Obama administration worked on the issue, but gave up. It was a bad idea to show specific packages with additional costs when searching for airline tickets, because travelers’ needs vary. And the industry is working to make non-mandatory payments more understandable and accessible to purchase. The rules here probably concern the choice of a common data standard and the obligation to provide free (subsidised) information to online travel agencies.
  7. Platitudes about more competition, better infrastructure management and stricter antitrust enforcement.

For its part, Airlines For America says new rules are unnecessary because the airline industry is competitive. In terms of the number of different airlines offering consumers a choice of flights, this is the case in most markets.

  • Competition is stronger than ever.[E]ven in 2019, there were an average of 3.46 competitors on all advertised routes in the United States, up from 3.33 in 2000. This year alone, two new low-cost airlines were launched and two more went public, further intensifying competition in the US airline market.

Competition has not changed much in 20 years, despite the consolidation of the industry. This is especially true when considering connecting routes, not just non-stop routes. For example, the merger of Delta and Northwest has certainly improved connections between the Southeast and upper Midwest. Smaller towns with flight options.

At this point, it’s hard to say whether the new airlines, Avelo and Breeze, will have a major impact on aviation in the United States. If Spirit and Frontier go public, nothing will change for consumers, even if it gives private equity funds a chance to cash in. In the long run, however, this is good news because it could encourage more private investment in start-up airlines.

  • The rates are low they are definitely lower than when the regulation was in place, even without the use of pandemic rates. There are flight options and low fares, and that’s something we don’t celebrate enough. However, the question remains as to why airlines are such a commoditized industry, where competition is primarily focused on price and they do not offer consumers real quality shopping options on domestic routes – the quality of premium offerings has clearly declined in recent decades. This depends on the technology and the way airline tickets are sold, as well as the limited ability of new entrants to compete in higher value markets (which is usually blocked by government policy, as I explain below).
  • More people have access to ; this is due to the lower rate clause.

The facts cited by Airlines For America are largely true. And the Biden administration should not get involved in a situation that raises costs for consumers and makes air travel unaffordable for many. Remember: When consumers are forced to drive instead of fly, it means a more dangerous journey.

However, there are real competition problems in the sector:

  • The airline industry receives huge subsidies, not just through the $79 billion in direct pandemic aid. This prevented the laggards in the industry from going bankrupt and dragging the other companies down with them. It is the government that is blocking the effects of competition.
  • In the United States, the government owns and operates almost all commercial airports. They conclude long-term leases for gates and often work with major airlines to prevent the entry of new competitors (regulatory capture). Because Atlanta is so closely tied to Delta, the airport ensures that the least attractive seats are available to new hires.
  • Some of the best served airports have slots set by the government: New York LaGuardia, New York JFK and Washington National. It is essentially a gift of ownership from the government to the airlines that work for it. During the pandemic, even use-it-or-lose-it rules were suspended to protect incumbents from newcomers.
  • In addition, foreign airlines are prohibited from owning U.S. airlines, which also limits competition.
  • It is difficult to sue airlines because the Airline Deregulation Act repeals state regulations, including general contractual claims under common law. The Department of Transportation becomes the only recourse for most consumers, and it unreasonably ignores complaints.

Where there are barriers to competition, this is due to government policy, with airlines having a significant influence on decision-making. A good example is the chairman of the House transportation committee. Government regulation should not benefit the consumer, as the airlines essentially control the process.

Airport sites need not be held permanently; a ten-year lease is sufficient. The same goes for boarding gates in congested airports. There should be no right of first refusal or right of renewal of these agreements. Foreign ownership rules should be relaxed to allow foreign airlines to operate in the United States in compliance with U.S. law. Taxpayers’ pockets should no longer be filled at the expense of the big airlines. We must also follow global best practice in aviation regulation and separate the roles of regulator and service provider. This means that the government controls the airports, security and traffic management, but does not provide them directly.

Lake View from the Wing

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